AOL unloads controlling interest in Patch
AOL all but unloaded its embattled local news network Patch to investment firm Hale Global on Wednesday.
Patch will act as a new limited liability company majority owned and operated by Hale.
The hyper-local network was a pet project of Armstrong's. It hired hundreds of reporters and ad sales staff in a bid for a local advertising market that has yet to materialize, eventually leading Armstrong to promise AOL investors that it would break even by the end of 2013. That did not happen, and the company begin to seek buyers.
"We are retaining a meaningful minority interest in the joint venture, and we stand to benefit from Patch’s pivot to platform excellence," Armstrong wrote in a memo to staffers.
In a live Q&A at Hearst Tower on Tuesday night, less than 24 hours before the announcement, Armstrong said Patch, which AOL acquired in 2009, was originally a five-to-seven-year investment that grew embattled by a short-term proxy fight.
"Out of that proxy battle basically we ended up with commitments to investors… to get Patch to run-rate profitability by the end of this year," Armstrong said.
"One of the lessons we learned during Patch…is we started worrying about Patch's profitability instantaneously versus what the product was," he said. "And the team got very distracted every time and ended up missing core product things."
Here's Armstrong's memo to the staff:
AOL has a strong track record of improving, pivoting, and partnering – that’s what successful companies and start-ups do. AOL’s return to growth has been built by making smart investments and by calibrating our investments while moving through opportunities.
We pivoted our ads business to programmatic, we pivoted our content business to powerful brands, and we pivoted our video production to becoming a video platform.
Today we are pivoting another area of our business: local. The local digital space will reach $152B by 2017, driven by a $21B growth in local digital revenue over the next three years and we have invested in local with Patch. The goal for Patch has always been simple – to be a local platform for information and commerce in towns and to serve communities in a meaningful and human way.
After extensive discussions over the last several months with many companies interested in the local media business and local platform business, today we are announcing a joint venture partnership with Hale Global. Hale Global is a private company that has a successful track record of investing and growing technology assets, and we believe they are very well positioned to nurture and grow Patch. Hale has made investments in local commerce and platforms, and they have a strong team of leaders and technical expertise. Hale’s CEO, Charlie Hale, is a strong believer in the power of local, local platforms, and local storytelling. Bud Rosenthal and Charlie Hale will be detailing Patch's go-forward plan and next steps with the Patch team today.
AOL has delivered on our commitment to our investors and put Patch in a position to be successful. We are retaining a meaningful minority interest in the joint venture, and we stand to benefit from Patch’s pivot to platform excellence.
While Patch pivots, it is important to remember that it serves millions of consumers throughout hundreds of towns in America and partners with some of the largest and smallest businesses that serve those communities. Hale will help Patch improve, and we will be partners with Hale in the next phase of the journey - TA